Nvidia has been one of the biggest beneficiaries of the artificial intelligence (AI) revolution, with its stock surging nearly 800% over the past two years. However, the semiconductor giant has faced challenges in the past three months, with its stock declining 1% despite delivering strong financial results and guidance that exceeded expectations. Concerns about Nvidia’s ability to sustain growth, its valuation, and short-term margin pressures from its Blackwell processors have dampened investor enthusiasm.

Meanwhile, lesser-known chipmakers Ambarella and Lumentum Holdings have emerged as significant beneficiaries of the AI boom, outpacing Nvidia’s recent performance. Ambarella’s stock rose 25%, and Lumentum’s stock gained nearly 23% in the past three months, driven by AI-related growth in their respective markets.

Ambarella: Riding the AI Vision Wave

Ambarella specializes in computer vision chips deployed in automotive and IoT applications. The AI computer vision processor market is expected to grow from $17.2 billion in 2023 to $45.7 billion by 2028, presenting a massive growth opportunity.

The company’s CV5 processor, based on a 5-nanometer process, supports AI workloads in automotive cameras, robotics, and consumer devices. Strong demand for this chip drove a 63% year-over-year revenue increase in Q3 FY2025 to $82.7 million. CEO Fermi Wang highlighted that higher-priced AI inference processors, including the CV5, have boosted average selling prices and set the stage for sustained demand.

Ambarella is also introducing its CV7 processors, with expectations for further growth in fiscal 2026 and beyond. The company has a $2.2 billion automotive revenue pipeline through FY2031, supported by expanding applications in consumer and security devices.

Lumentum Holdings: Powering AI Data Centers

Lumentum is capitalizing on the demand for high-speed data transmission in AI servers. Spending on generative AI networking equipment is projected to grow at an annual rate of 34% between 2023 and 2028, reaching $34 billion in annual revenue.

The company reported a 6% year-over-year revenue increase in Q1 FY2025 to $337 million, marking a turnaround from the 23% decline in fiscal 2024. Cloud and networking revenue, which now constitutes 84% of Lumentum’s business, surged 23% year-over-year during the quarter.

Lumentum is expanding its manufacturing capacity to meet rising demand from hyperscale customers for its fiber-optic lasers. Analysts project the company’s revenue will grow 17% in FY2025 to $1.59 billion, with earnings expected to jump 56% to $1.58 per share.

Nvidia’s Challenges and the Rise of AI Opportunities

Despite Nvidia’s dominant position in AI-driven graphics cards, the company faces challenges in maintaining its growth. In contrast, Ambarella and Lumentum are leveraging specific AI opportunities in computer vision and data transmission, respectively, to deliver robust growth.

The long-term prospects for all three companies remain strong, but recent developments suggest that investors looking for diversified exposure to AI should consider lesser-known players like Ambarella and Lumentum.

Source: The Motley Fool.

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